Accounting 162 – Material 005

OPERATING SEGMENT
1. An entity shall report separately information about each operating segment that exceeds the quantitative thresholds. PFRS 8 enumerates 3. Among are in the
selection, except: A
A Its reported external revenue is 10 per cent or more of the combined revenue, internal and external, of all operating segments.
B The absolute amount of its reported profit or loss is 10 per cent or more of the greater, in absolute amount, of (i) the combined reported profit of all operating
segments that did not report a loss and (ii) the combined reported loss of all operating segments that reported a loss.
C Its assets are 10 per cent or more of the combined assets of all operating segments.
D All are among the quantitative threshold
2. T/F PFRS 8 shall apply to individual financial statements of an entity whose debt or equity instruments are traded in a public market - a domestic or foreign stock
exchange or an over-the-counter market, including local and regional markets. T
3. T/F An entity that in the process of filing, its financial statements with a securities commission or other regulatory organisation for the purpose of issuing any
class of instruments in a public market shall, as well, comply with PFRS 8. T
4. T/F If a financial report contains both the consolidated financial statements of a parent that is within the scope of PFRS 8 as well as the parent’s separate financial
statements, segment information is required in the consolidated financial statements and individual financial statements. F
5. T/F If the total revenue reported by operating segments constitutes less than 75 percent of the entity’s revenue, additional operating segments shall be identified
as reportable segments (even if they do not meet the criteria) until at least 75 percent of the entity’s revenue is included in reportable segments. FALSE; External
6. T/F If management judges that an operating segment identified as a reportable segment in the immediately preceding period is of continuing significance,
information about that segment shall continue to be reported separately in the current period even if it no longer meets the criteria for reportability. TRUE
7. T/F If an operating segment is identified as a reportable segment in the current period in accordance with the quantitative thresholds, segment data for a prior
period presented for comparative purposes shall be restated to reflect the newly reportable segment as a separate segment, even if that segment did not satisfy
the criteria for reportability in the prior period, unless the necessary information is not available and the cost to develop it would be excessive. TRUE
8. An entity reported the following segment profit or loss for the current year:
Segment 1 7,000,000 profit
Segment 2 3,000,000 profit
Segment 3 4,000,000 loss
Segment 4 1,000,000 profit
Segment 5 500,000 loss
What are the reportable segments? Segments 1, 2 and 3
9. An entity reported revenue of P50,000,000, excluding intersegment sales of P10,000,000, expenses of P47,000,000 and net income of P3,000,000 for the current
year. Expenses included payroll costs of P15,000,000. The combined assets of all segments totalled P45,000,000. What is the minimum amount of sales to a
major customer? 5,000,000
10. Based on the immediate preceding data, what is the minimum amount of external revenue to be disclosed by reportable segments? 37,500,000

INTERIM FINANCIAL REPORTING

11. Governments, securities regulators, stock exchanges, and accountancy bodies often require entities whose debt or equity securities are publicly traded to publish
interim financial reports. TRUE
12. The Financial Reporting Standards Council encourages publicly traded entities to provide interim financial reports that conform to the recognition, measurement,
and disclosure principles set out in this Standard. TRUE
13. ABC prepares quarterly interim financial reports. It normally sets 10% of the total goods sold as provision for warranty. However, in the succeeding quarter, a
design fault was found and warranty claims were expected to be 15% for the entire year. The amount of provision to be presented in the statement of financial
position shall be the product of the revenue generated for the succeeding quarter and the revised rate of product warranty. FALSE
14. Provision for warranty is recognized at interim while the cost of planned major periodic maintenance that is expected to occur late in the year is not anticipated
for interim purposes. TRUE
15. Inventories are measured at lower of cost or net realizable value even for interim purpose. TRUE
16. An entity and its division reported the following for the current year:
Sales to unaffiliated customers 40,000,000
Intersegment sales of products similar to those sold to unaffiliated customers 12,000,000
Interest earned on loans to other operating segments 1,000,000
The entity and all of its divisions are engaged solely in manufacturing operations. To qualify as reportable segment, the segment revenue should at least be what
amount? 5,200,000
17. An entity provided the following information for the current year:
Sales Traceable expenses
Segment A 5,000,000 3,000,000
Segment B 4,000,000 2,500,000
Segment C 3,000,000 1,500,000
The entity incurred the following expenses:
Indirect expenses 1,800,000
General corporate expenses 1,200,000
Interest expense 600,000
Income tax expense 400,000
The interest expense and income tax expense are regularly reviewed by the chief operating decision maker as a measure of profit or loss. What is the profit of
Segment C? 800,000
18. An entity provided the following information for the first quarter:
Loss from typhoon 800,000
Insurance for the calendar year 200,000
Loss on inventory writedown 100,000
Property taxes for the calendar year 500,000
Advertising of a new product 300,000
Depreciation expense for the year 600,000
Year-end bonuses to employees 1,200,000
Ordinary repairs to equipment 150,000
What total amount of expenses should be reported in the first quarter? 1,975,000
19. An entity reported P950,000 net income for the quarter ended September 30, 2017 which included the following after-tax items:
A P600,000 expropriation gain realized in May 2017 was allocated equally to the second, third, and fourth quarters of 2017. A P160,000 cumulative effect loss
resulting from a change in inventory valuation method was recognized on August 31, 2017. In addition, the entity paid P480,000 on February 1, 2017 for 2017
calendar-year real property tax. Of this amount, P120,000 was allocated to the third quarter of 2017. What is the net income for the quarter ended September
30, 2017? 910,000
20. A calendar-year corporation had the following income before tax provision and estimated effective annual tax rates for the first three quarters:
Quarter Income before income tax Effective annual tax rate
First 5,000,000 30%
Second 8,000,000 30%
Third 7,000,000 25%
What is the income tax provision in the interim income statement for the third quarter? 1,100,000